In just more than a week, 10 states will open a new chapter in pollution enforcement. On Sept. 25, 233 utility plants will come under new regulation for emissions.
Roughly, the idea is to sell permissions to pollute. Those who buy the permissions at auction now can sell them later to utilities who have not cut emissions.The plan gives a financial incentive to those who cut output and an expense to those who don't.
The 10 states that participate in
The Regional Greenhouse Gas Initiative (RGGI) are: Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Rhode Island, and Vermont.
The states are supposed to invest whatever they earn from these pollution offsets in clean technology. The states aim to reduce power plant carbon dioxide emissions 10 percent by 2018.
The New York Times explains:
The Regional Greenhouse Gas Initiative, or RGGI, will cap emissions for 233 plants. By putting a price on the carbon dioxide they emit, it gives plants a financial incentive to clean themselves up, with the proceeds channeled to energy-saving and renewable energy programs in each state.
The states will set their own limits, with each issuing tradable permits, or allowances, for carbon pollution. On Sept. 25, utilities will start bidding at auction for allowances, which they can later sell -- mimicking the so-called cap-and-trade programs that effectively reduced acid rain in the 1990s.
The concept has been praised by environmentalists and state officials. But the emissions cap was based on overestimates of carbon dioxide output, which has dropped sharply from 2005 to 2006 and is on a lower trajectory than anticipated.
So auction demand may be weak at the start, with millions of allowances the states planned to sell not immediately needed. And with the cap on emissions most likely to be higher, at least initially, than the plants' actual carbon-dioxide output, it may be many months before utilities have an incentive to cut pollution.
As traders watched the RGGI dynamic evolve, the already low price of carbon futures fell by about 40 percent in the last three months in this country, according to Evolution Markets, a brokerage firm.
